Wheat prices may rise after record procurement, say traders

Wheat prices in the country are likely to climb higher once the current year's arrivals get over and the government agencies mop up nearly 20 million tonnes in the current season.

Currently, arrivals are flooding the market and, according to trade and industry sources, there is no shortage or other supply problems in the wheat mandis. But traders expect prices to go up once the current arrivals ebb. However, opinion is divided on the time when the prices start going up.

Procurement agencies in the country expect to mop up a near-record 20 million tonnes of wheat from farmers in 2008, against the 11.1 million tonnes procured last year.

The Food Corporation of India, the country's main foodgrain procurement agency, has already bought 17 million tonnes of wheat.

FCI bought nearly 5 lakh tonnes in one day alone, according to reports.

The government is already paying minimum support price of Rs1,000 per quintal (against Rs850 last year) for wheat in an effort to avoid imports this year.

While the government is busy buying grain for buffer stocks in states such as Punjab and Haryana, Madhya Pradesh, Rajasthan and Bihar, the private trade, particularly millers, get supplies from Maharashtra and Madhya Pradesh.

Private millers in Karnataka pay around Rs1,280-90 per quintal of wheat they are able to get by road from Maharashtra and Madhya Pradesh. Mills in Tamil Nadu pay Rs50 higher.

Market prices for wheat in Delhi, however, were ruling at Rs1,070-1,120 a quintal. Prices have been ruling at this level for the last few days.

The higher wheat procurement is attributed mainly to higher minimum support price for wheat , even as the higher cess and taxes in Punjab and Haryana have effectively helped to keep out private trade from the grain markets.